Maravi

Take higher interest in financing power plants, Chitundu urges govt

Take higher interest in financing power plants, Chitundu urges govt
Written by Chiwoyu Sinyangwe
Tuesday, September 29, 2009 4:49:09 PM

THERE is need for policy reversal to increase state participation in financing new power plants in the country, Zesco acting managing director Cyprian Chitundu has said.

Zesco is currently in talks with Export and Import Bank of China, Africa Development Bank (AfDB) and European Investment Bank (EIB), among other key international banks, for a US $640 million loan to increase power generation by 480 megawatts by 2012 to meet the growing demand.

Chitundu said Zesco currently generates 1,800 megawatts of electricity which was expected to be upped to 2,280 megawatts once Kariba North Bank extension and the Itezhi tezhi projects were completed by 2012.

“If we are to meet growing need for investment in new power plants, we will need policy reversal to have the government take higher interest because of the high cost of the projects,” Chitundu said.

“We have seen it in the United States of America where the government has taken a stake in the banks and even companies like GM [General Motors].”

And Chitundu has disclosed that Zesco had almost sealed a US $420 million loan with Exim Bank of China for the 360 mega watts Kariba North Bank extension project expected to come on stream by 2012.

He said Exim Bank demanded a 15 per cent of the total cost of the project ($60 million) to be met by Zambia, the money which Zesco had sourced from the Development Bank of Southern Africa (DBSA).

“We are almost at the point of closing the deal as we are on the dotted line,” Chitundu said. “The loan repayment is between 15 - 20 years and this money is not borrowed on Zesco balance sheet but we have created special purpose vehicle called Kariba North Bank Extension Company to ensure the loan is repaid using the cash stream once the [power] plants start production and we would be signing power purchase agreement with potential buyers of power.”

Chitundu said Zesco was simultaneously looking at sourcing US $220 million from AfDB and EIB for the development of the Itezhi tezhi power station.

The Itezhi tezhi power station would also be financed via project financing under the Itezhi tezhi Power Corporation which will be responsible for loan repayment through power sales.

“Our team from Zesco including our transaction advisors and DBSA will be travelling to Tunisia next week to negotiate with AfDB and we are hopeful that by next year June, we will have achieved the finance closure,” he said.

He said the development of the 120 mega watts power station in Itezhi tezhi would also involve construction of the power line to connect the plant to the national grid.

Chitundu said the two new power plants would be adequate to help Zambia meet the growing energy demand especially with new investments in the vast mining industry.

“But after 2012, we will need to look at developing other new projects like the Kafue Gorge Lower hydropower station which is 750 MW and needs an investment of about $1.5 billion,” said Chitundu. “We will need new investment in power generation facilities otherwise there will be severe shortages of electricity similar to the situation we experienced in the last few years.”

Labels: CYPRIAN CHITUNDU, ENERGY, HYDRO POWER

posted by MrK @ 3:45 PM